Tesla’s Powerwall: Giant Leap or Small Step?

Tesla’s announcement of their new Powerwall stationary battery created quite a whirlwind of excitement. As the dust begins to settle and the initial volleys of hyperbole from from both critics and fans die down, what does the launch of Elon Musk’s new brainchild actually mean for solar users?

For those of you who have been under a rock for the last week, Uber-entrepreneur Elon Musk stepped out on stage at the Tesla Motors Hawthorne Design Studio on April 30th to announce the much anticipated release of their new, not-so-top secret product: a stand alone energy storage device called the Powerwall. According to the Tesla press release: “Powerwall is available in 10kWh, optimized for backup applications or 7kWh optimized for daily use applications. Both can be connected with solar or grid and both can provide backup power. The 10kWh Powerwall is optimized to provide backup when the grid goes down, providing power for your home when you need it most. When paired with solar power, the 7kWh Powerwall can be used in daily cycling to extend the environmental and cost benefits of solar into the night when sunlight is unavailable.

Tesla’s selling price to installers is $3500 for 10kWh and $3000 for 7kWh. (Price excludes inverter and installation.) Deliveries begin in late Summer (2015).

One enthusiastic Blogger immediately proclaimed “Tesla’s Elon Musk Just Changed The World Forever” and followed the bold title with the statement that “Not since Karl Benz was tinkering around in his garage engineering what would become the automobile has history had a more defining moment than when Elon Musk unveiled the solar powered Tesla Energy Wall (sic).

It was a dream of Nikola Tesla to bring free energy to the world that eluded him his entire pioneering life but Elon Musk is going where no business heretofore has ever gone by smacking the faces of the most entrenched energy Robber Barons that have long suckled the profiteering teat of unsustainable energy.”

Despite the scathing title, The article is riddled with inaccuracies and questionable assumptions. For instance, the author states: “And here’s where the economics of the Powerwall break down. If you do not have a big enough solar system to get your home entirely off the grid, then there is simply no point whatsoever in paying 30 cents per kwh to get electricity via the Powerwall. At night, when you’re not generating solar power, you could simply get your electricity from the grid. For an average 12.5 cents a kwh.” Not only is he assuming that the power wall is only going to be used to store solar generation, but he is also adding the kWh cost of solar generation from a LEASED system to the kWh price of the Powerwall, then comparing it to an average kWh price, with no mention of the on-peak price in an expensive power market like California or Hawaii (or Jamaica, or Saudi Arabia), where the Powerwall would excel. Readers in the comments section pounded Mr. Helman, and he finally had to respond by saying: “… I honestly hope we all have economically sensible battery backups in our homes in 20 years. I’m thankful that rich, green early adopters lead the way.” In the fine print he is thankful for “rich, green early adopters,” despite the contemptuous tone of the articles title.

Ramez Naam may have the laid out the best, most comprehensive, big picture analysis of the significance of the Powerwall in his article, “Tesla Battery Economics: On the Path to Disruption.” Naam, unlike Helman, looks beyond the Power Wall’s ability to compete directly on simple economics against current, dirty U.S. fossil fueled electric generation. He notes that the U.S. is not the only market for the Powerwall. In many sunny countries, electrical prices are far higher. “Even Germany,” Naam points out, “gets enough sun that the price of rooftop solar is below that of grid electricity. And in Germany, feed-in-tarrifs to homes that put solar on the grid are plunging. There’s now a roughly 20 euro cent difference between the price of retail electricity and the feed in tariff in Germany. That’s 22 US cents. So if the Tesla battery is really 15 cents per kwh, it makes more sense for German solar customers to store their excess solar electricity in a battery than it does to provide it back to the grid.”

Naam also points out that:” For some parts of the US with time-of-use plans, this battery is right on the edge of being profitable. From a solar storage perspective, for most of the US, where Net Metering exists, this battery isn’t quite cheap enough. But it’s in the right ballpark. And that means a lot.

Net Metering plans in the US are filling up. California’s may be full by the end of 2016 or 2017, modulo additional legal changes. That would severely impact the economics of solar. But the Tesla battery hedges against that. In the absence of Net Metering, in an expensive electricity state with lots of sun, the battery would allow solar owners to save power for the evening or night-time hours in a cost effective way. And with another factor of 2 price reduction, it would be a slam dunk economically for solar storage anywhere Net Metering was full, where rates were pushed down excessively, or where such laws didn’t exist.
That is also a policy tool in debates with utilities. If they see Net Metering reductions as a tool to slow rooftop solar, they’ll be forced to confront the fact that solar owners with cheap batteries are less dependent on Net Metering.”

Even detractors like the writer at Forbes can’t completely hide their enthusiasm for what Musk has done. It has got to warm the heart of the most cynical free-market capitalist to see the rise of a figure like Musk. A disruptor, a big picture technologist on par with Thomas Edison, bringing forth innovation and a Master Plan by laying his own money on the table and taking personal responsibility for his failures, as well as successes. Unfortunately for the Forbes crowd, this time, the innovation is coming from outside the old boys network.